Correlation Between EVN AG and TELECOM PLUS

Can any of the company-specific risk be diversified away by investing in both EVN AG and TELECOM PLUS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining EVN AG and TELECOM PLUS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EVN AG and TELECOM PLUS PLC, you can compare the effects of market volatilities on EVN AG and TELECOM PLUS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in EVN AG with a short position of TELECOM PLUS. Check out your portfolio center. Please also check ongoing floating volatility patterns of EVN AG and TELECOM PLUS.

Diversification Opportunities for EVN AG and TELECOM PLUS

0.26

Correlation Coefficient

EVN AG  TELECOM PLUS

Modest diversification

The 3 months correlation between EVN and TELECOM is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding EVN AG and TELECOM PLUS PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TELECOM PLUS PLC and EVN AG is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on EVN AG are associated (or correlated) with TELECOM PLUS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TELECOM PLUS PLC has no effect on the direction of EVN AG i.e., EVN AG and TELECOM PLUS go up and down completely randomly.

Pair Corralation between EVN AG and TELECOM PLUS

Assuming the 90 days horizon EVN AG is expected to under-perform the TELECOM PLUS. But the stock apears to be less risky and, when comparing its historical volatility, EVN AG is 1.25 times less risky than TELECOM PLUS. The stock trades about -0.36 of its potential returns per unit of risk. The TELECOM PLUS PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,025  in TELECOM PLUS PLC on September 22, 2024 and sell it today you would earn a total of  15.00  from holding TELECOM PLUS PLC or generate 0.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

EVN AG  vs.  TELECOM PLUS PLC

EVN AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EVN AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

TELECOM PLUS PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TELECOM PLUS PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, TELECOM PLUS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with EVN AG and TELECOM PLUS

The main advantage of trading using opposite EVN AG and TELECOM PLUS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EVN AG position performs unexpectedly, TELECOM PLUS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in TELECOM PLUS will offset losses from the drop in TELECOM PLUS's long position.

The idea behind EVN AG and TELECOM PLUS PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.